In recent days, the financial world has crossed Tizg because of the new start in the empire of artificial intelligence (AI). Chinese company Deepseek He sent shock waves around the world after posting a model similar to Chatgpt.
The primary reason why investors panic is that Deepseek claims to have trained his model on an older, less sophisticated chips vessel Nvidia(NASDAQ: NVDA). These claims left investors to scratch their heads, asking if the newer architecture of Nvidia is worth high prices.
As a result, Nvidia shares have moved into a one -day descending spiral. Is this an opportunity to buy or would Nvidia shares go much lower?
Below, I will analyze some interesting trends in Nvidia’s section and make a case in which direction I think the shares could be run.
The chart below illustrates multiple sales seen in Nvidia’s supplies in the days after Deepseek’s arrival. Although you would think that the refusal of this size is saying everything, something is happening in the background something pretty interesting.
When the price of the stock moves, so does the company value. In the case of NVIDIA, the price of a company cratering shares resulted in as much as $ 600 billion lost market capitalization.
Since Nvidia’s market cap has fallen, so does multiple estimates. Of this writing (January 29), Nvidia -na price for earnings (p/e) is a multiple 30.1.
Below, I will dive into why this contraction in multiple values is important and what history suggests that the following could happen.
Picture source: Getty Images.
In the table below, I summarized Nvidii -is a fourth of a quarter of the area in the last year.
Category
10/31/2023
1/31/2024
30.4.2024
7/31/2024
10/31/2024
Current
Bottom Price on Earnings (P/E)
24.5
30.4
35.7
44.6
33.9
30.1
Data Source: Yahoo! Finances.
The last time Nvidia forward p/e hovered about 30 last January. This is important to note, because in January 2024, the Nvidia market cap was $ 1.5 trillion – approximately half of what is today.
Considering the parity between P/E of the company now and a year ago, you may be inclined to think that Nvidia’s shares will rise more – as was the case during 2024. Although such a dynamics can happen, there is some important shade to consider this time.
Since the current Nvidia P/E Multifrous is in line with the place where it was a year ago, despite the doubled company values, this implies that the Analysts on Wall Street also expect Nvidia earnings to double.
Looking at a different way that Nvidia has doubled the market cap, but the company’s earnings were not accelerated by a proportionate pace, then Nvidia’s forward p/e would have expanded. This is a concept known as the expansion of evaluation.
But as I pointed out in the introduction, Deepsek’s story calls into questioning what the trends of demand for AI infrastructure will look like – especially graphic processing units (GPU), which are Nvidia’s bread and butter.
Honestly, I would not be surprised if some analysts began to spread their projections of revenue and earnings for Nvidia. Although this does not mean that Nvidia should be considered overrated, I think that investors should let go of the industry experts to try deep news and do their models.
In other words, Nvidia’s current forward is almost identical to where it was before, it could be considered a little coincidence, because earnings estimates are almost certainly changing – in this way they question how relevant the ratio of P/E is currently.
At a wider level, I am convinced that Nvidia will remain a leader in the AI race because his GPUs should continue to play an important role in the development of the technology that goes forward. Just how much? It’s a question of $ 1 billion.
Although history can suggest that Nvidia could double this year, I would think twice about it. In the long run, I think there is still a lot of values that need to be recognized by investment in the Nvidia section. I just don’t think the shares will re -double in 2025.
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